Andrew Tyrie's work is nearly done.
The Conservative politician, who has been a key figure in attempts to clean up the banking system, stood up in the Commons last week to remind fellow MPs of the tasks that had been set for the parliamentary commission on banking standards, which he had chaired.
The first was to report on professional standards in the banking industry in the wake of the Libor rigging crisis, and the second was to outline the lessons that could be learned for the government, while making recommendations for legislative change.
Much of that work may be concluded this week, with the 200-page banking reform bill entering the Lords on Monday for what could be the last time. With just one amendment to the bill still proving contentious, there is an expectation the work will be completed before the Christmas recess.
The legislation includes a package of measures intended to force senior bankers to take responsibility when things go wrong, allowing bankers to be charged with reckless misconduct if their institutions go bust, and forcing them to erect an "electrified" ringfence between their high-street and investment banking operations.
Last week's debate in the Commons coincided with a timely reminder of the scandals that had first set Tyrie and his fellow commissioners – made up of lords and MPs including the former chancellor Lord Lawson and the Archbishop of Canterbury, Justin Welby – upon their task. Lloyds Banking Group was fined a record £28m for a bonus culture that saw staff mis-sell financial products, while Royal Bank of Scotland, which was also bailed out, was fined £60m for breaching US sanctions rules.
"The banks have discovered that the scale of the damage done by the revelations and the scale of the fines that are now being imposed are systemic in implication for their institutions and that has shaken them up a lot," Tyrie told MPs last week. "But I do think the culture at the top of our banks is changing. The task of our legislation is to entrench that change for a generation. We have had this crisis. The horse has bolted. What we have got to do now is devise a stable door that can keep the next horse in."
Stuart McWilliam, a campaigner for Global Witness, said changes to the rules facing top bankers were a sea change because the City regulator, the Financial Conduct Authority, would be better able to hold banks to account. "It gives the FCA the power to hold the most senior bankers personally responsible for failures at their banks – a pretty good incentive for changing bankers' behaviour for the better," he said.
Alan Bainbridge, a lawyer at Norton Rose Fulbright,described the changes to how top bankers are authorised to work in the City as groundbreaking.
The existing approved persons regime will be changed with a new system aimed at top bankers taking responsibility for their actions and a new licensing regime. There is scepticism about whether an offence of reckless misconduct, under which bankers can be tried if their institutions collapse, can be used in practice.
But Conservative MP Mark Garnier, who sits on the Treasury select committee and was on the parliamentary commission on banking standards, likened it to a "nuclear deterrent" in the Commons last week.
One of the most crucial measures is the "electrification" of the ringfence between high street and investment banks. Bainbridge said this was "tantamount" to the Glass-Steagall rules imposed after the Great Depression in the US in the 1930s and only dismantled 15 years ago.
Lord Sharkey, the Liberal Democrat peer whose amendment on capping payday loan rates forced the government to act to restrict high rates of interest, said the electrification was the "key action" from the legislation.
"Parliament will need to keep an eye on how this really works. Will Chinese walls really be sufficient? Will the culture of investment banks continue to dominate the management thinking of retail banks held in the same groups," said Sharkey.
The Policy Exchange thinktank is warning of rising costs to customers from the ringfence, which does not need to be erected until 2019. Omar Ali, UK head of banking and capital markets at accountancy group EY, said the legislation meant that the "fabric of banking is changing" and the UK will have the most stringent set of rules anywhere in the world. Banks could end up becoming too risk averse, which could result in restricted lending to the real economy, he warned.
Even as royal assent comes closer, questions are still being asked about whether legislation can change the culture of banking. Garnier told MPs last week that a new industry body monitoring banking standards and the emphasis on top bankers taking responsibility was significant.
"An organisation such as HSBC has 270,000 people working for it, so no matter how sincere the integrity of the individual at the top, we must work out a mechanism to drive integrity throughout the system. Personal accountability for the senior management of the banks is crucial in that.
"I keep coming back to this point: if [HSBC's chairman] Douglas Flint is waking up at 3 o'clock in the morning worrying that somebody in Kidderminster is getting something wrong, that is a good thing."
Sharkey is among those who think that increased competition on the high street is also needed. The big four – Lloyds, RBS, Barclays and HSBC – control over 75% of the market.
"The banking reform bill addresses the regulatory issues, as it should. Banking culture is less easy to fix. There are some who believe that there is still no real competition in our banking system," Sharkey said. "What [will] keep them honest is competition for customers."
No small change
What's in the banking reform bill
• An "electrified" ringfence between retail and investment banks
• Senior managers need to be allocated specific roles at banks and held to account when things go wrong
• A licensing regime requiring "certification" of individuals taking risks at banks
• An offence of reckless misconduct, with which bankers can be charged if their banks go bust
• Reform of the Bank of England's management structure
• A requirement on the governor of the Bank of England to expose any lobbying by banks
• The abolition of UK Financial Investments, which looks after the state holdings in the bailed-out banks
• Compensation for whistleblowers who expose problems at their firms
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